Food Stamp Program:

States Face Reduced Federal Reimbursements for Administrative Costs

RCED/AIMD-99-231: Published: Jul 23, 1999. Publicly Released: Jul 23, 1999.

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Pursuant to a legislative requirement, GAO reviewed the Department of Health and Human Services' (HHS) efforts to reduce future federal reimbursements of states' administrative costs for the Food Stamp Program, focusing on: (1) HHS' administrative cost determinations, related estimates provided by the states to HHS, and the reasons for any differences between HHS' determinations and the states' estimates; (2) the reliability of HHS' determinations; and (3) what portion of common administrative costs could have been charged to the Food Stamp Program.

GAO noted that: (1) HHS' determinations of the portion of common administrative costs that could have been allocated to the Food Stamp Program annually exceeded, in aggregate, the states' estimates for these costs by $61 million; (2) specifically, the states, including the District of Columbia, estimated that about $166 million, in aggregate, was included in their Temporary Assistance for Needy Families block grants for common administrative costs attributable to the Food Stamp program; (3) in contrast, HHS determined this annual amount to be about $227 million; because HHS' determinations are final, federal reimbursements to the states under the Food Stamp Program will be reduced by this amount, even though such determinations are subject to an administrative appeal process; (4) four principal reasons cited by HHS to explain the differences between its determinations and the states' estimates were the following: (a) some states did not provide sufficient data or information within the prescribed timeframes, therefore HHS relied on a formula to make determinations; (b) some states omitted administrative costs from their estimates that HHS believes should have been included; (c) some states incorrectly calculated or could not support their allocation of common administrative costs; or (d) some states incorrectly decreased their food stamp estimates by an amount equal to the Medicaid costs that the states had charged to the Food Stamp Program; (5) regarding the reliability of HHS' determinations, GAO's review of HHS' determinations for 10 states found significant calculation errors; (6) specifically, GAO found errors in seven of these determinations that generally resulted in underestimating costs attributable to the Food Stamp Program by $8.8 million in aggregate; (7) in addition, the states have raised a number of concerns with HHS' methodology for calculating these determinations; (8) in general, these states contend that the Agricultural Reform Act calls for a narrow definition of these costs that includes only the time that staff in local welfare offices spend completing and processing participant applications; in contrast, HHS' definition includes other costs, such as those for maintaining case files and electronic databases and for training; and (9) many states also question HHS' determination of the percentages of administrative costs that were either common to the Aid to Families With Dependent Children, Food Stamp, and Medicaid programs or unique to the Aid to Families With Dependent Children program.

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